Atkore Inc. Q2 FY2025 earnings call

· Second quarter performance was strong with net sales of $702 million, 5% organic volume growth, adjusted EBITDA of $116 million, and adjusted EPS of $2.04. · Divested Northwest Polymers recycling business in February. Ratified a new five-year labor agreement with the United Steelworkers at the Harvey, Illinois facility. Repurchased approximately $50 million in shares and increased the dividend to $0.33 per share. · Impairment charge of $50 million related to HDP pipe and conduit products due to competing technologies to fiber optic cable and delays in government stimulus funding for broadband infrastructure.· Positive on U.S.-made steel conduit demand in 2025, but tariffs remain uncertain. Maintaining full-year 2025 adjusted EBITDA midpoint of $400 million.

In the second quarter, Atkore achieved net sales of $702 million. Adjusted EBITDA was $116 million and adjusted EPS was $2.04. Organic volume growth was 5% driven by construction services, steel conduit, metal framing, and cable management products. The Electrical segment's adjusted EBITDA margins compressed due to pricing declines related to PVC and steel conduit products. The S&I segment's adjusted EBITDA margins improved due to strong quarterly volume performance from construction services, metal framing, and cable management, along with improved productivity contributing approximately $11 million to segment EBITDA.

· Q3 net sales expected in the range of $715 million to $745 million, adjusted EBITDA in the range of $85 million to $105 million, and adjusted EPS in the range of $1.25 to $1.75. · Full-year 2025 adjusted EBITDA expected in the range of $375 million to $425 million and adjusted EPS in the range of $5.75 to $6.85.· Volume expectations for full-year closer to low-single digit growth due to tariffs and market uncertainty.

· Uncertainty regarding the impact of tariffs on market share and gross margin.· Delayed deployment of government stimulus funding for broadband infrastructure leading to impairment of certain assets.· Volatility in construction sentiment with potential slower activity moving forward.

Q: Hey, good morning guys. Thanks for taking a couple of questions. Maybe we could start with PVC conduits and just kind of what you're expecting for the balance of the year? I know we -- after Q1, kind of the idea was would be pandemic pricing perhaps by the end of fiscal '25. Just wanted to see if that's still in line with the way you're looking at it?

A: Yes, Chris, I think at this stage, again, as I think John Deitzer said, it's hard to predict out three and six months, even one month. But what we guided in the last quarter still seems to be our best guess from what we've seen, pricing has continued to go down some, at least for us, but it's kind of on track back to our earnings and everything we said with what we expect. So as much as we can forecast the future for ourselves. That's what we are estimating at this stage.

Q: Hey, good morning everyone. So maybe starting out. Could you give us some color what you're seeing more recently in terms of the import levels in both PVC and steel, particularly around the improved metal pricing you guys noted? And then maybe on that, could you quantify what the potential upside on pricing could be should these tariffs be more sticky and imports return to more normal levels?

A: Yes. I'll start, David, but even if you try to say projections if we get that specific on the future here. So as I kind of mentioned with Chris, I did mention with Chris, is PVC imports year-over-year for the last quarter, up solid double-digit percent. It's hard to estimate going forward if that will continue or if it's just people getting in before the tariffs or even to go, hey, we shipped everything we could and like they literally don't even have capacity. Again, I don't know my specific competition domestically or internationally that well to know what's in their playbook. I do perceive that, again, with all the variability of administration and tariffs that some imports were coming from China, and I would expect that to be decreased just because the current tariffs there across -- I think all products were China, but at least PVC kind of it's well over 100%. So that's not as economical for the Latin American countries, the tariff right now on the major importers is 10%. And again, that's one product. You got to remember, a lot of this we've talked about is the inefficiency of freight. So I wouldn't apply it. The whole delivered cost isn't 10% up because it's just on the product and so forth. So whatever estimate you want to say, 5%, 7% I'm making up a totally random number, but if you follow my math. But it is a headwind. I mean, it helps us as we've covered in prepared remarks, tariffs overall, and John Pregenzer discussed with the one chart are typically a good thing for Atkore going forward. As for steel conduit, they were actually in the quarter down year-over-year. So again, just like I don't want to overread into PVC, I don't want to overread into steel, but from a year-over-year perspective down there, I do think because that is I think I covered in the very beginning remarks, we're seeing for all steel conduit now with 232, where the administration removed exemptions is a 25% tariff. So again, can it be economical to bring products across, yes. but that's a higher headwind that either means whatever they do with that. But how aggressive they are, what pricing they sell at again independent companies, but that's a good thing for us. And therefore, without dimensionalizing an exact dollar, where we've held the guide is the fact that we do see tariffs helping EBITDA profits a little bit offset, as John Deitzer said, just from the standpoint that if you look into the second half, it's hard to predict the economy, good luck to the Fed over the next two days. But we could see some projects delayed, association ability and contractors and things like that. I think there was a stat in them that their contractors are seeing up to 20% of jobs delayed or possibly postponed. So we were just trying to balance good thing tariffs offset by maybe a little less volume. And as John Deitzer said, and then I'll wrap up my filibuster here is we're still projecting, let's say, low single-digit growth. But if we're at zero in the first half of the year with a good solid Q2, I mean, I'm over specific on math, if you assume 3%, don't be locked on that number for the full year. Implicitly, that means 6% and that we will -- we expect to be mid- to high-single-digit growth here in the second half of the year. So we're still pretty optimistic, but that's the balance of tariffs and volume and stuff like that.

Q: Thank you. Good morning everyone. Look, I appreciate all the commentary about limited visibility. That's just the nature of your short-cycle business. So I know you have to couch it with that condition. But can you size for us maybe directionally, but any position is helpful of what the net tariff benefit is you're assuming now in your updated fiscal '25 guide?

A: Deane, I would just try to do it this way is for the CEO, Matt and John can add to its CEO, Matt, by the way is John Deitzer, making front of me for high-level generalizations is if you took 2% or 3% off of volume and looked at our fall through, you could do hear how much that is down and then assume it's picked up with the increase in tariffs for the second half. So whatever your estimate that should get you close. Hopefully, that's as precise as you get it.

Q: Thank you. Good morning everyone. Look, I appreciate all the commentary about limited visibility. That's just the nature of your short-cycle business. So I know you have to couch it with that condition. But can you size for us maybe directionally, but any position is helpful of what the net tariff benefit is you're assuming now in your updated fiscal '25 guide?

A: Deane, I would just try to do it this way is for the CEO, Matt and John can add to its CEO, Matt, by the way is John Deitzer, making front of me for high-level generalizations is if you took 2% or 3% off of volume and looked at our fall through, you could do hear how much that is down and then assume it's picked up with the increase in tariffs for the second half. So whatever your estimate that should get you close. Hopefully, that's as precise as you get it.

Q: Hey good morning guys. Thanks for taking the question. Just had a quick follow-up on that last point, actually. I mean, I guess, are you getting any direction from the administration on whether it's tariffs or specifically in this case on the BEI [ph] program, I guess, it seems early to be taking an impairment when at least I haven't seen an explicit change to the program, the real wants to preemptively impairing the assets. I guess are you getting any actual concrete word from the administration on how they're rolling this out?

A: No. At least Chris, I'm not aware of a specific other what's been covered in directors. I know commerce -- I think it was the Commerce Secretary. I could be wrong on which one, but 90% shorted published a press release, Wall Street Journal article. That's where I'm going to say, Chris, if you look back and say why it's running the app, making those assumptions, but to go it's a little bit darn if you do, darn if you don't, to go, well, hold it. Well, nine months from now, we're seeing it. Well, why now and why not earlier, we'll hold it here as the least the key inflection point of the administration saying either they had or at least they intended to open it up. So we decided to take the prudent action and take -- run the analysis with our accounting partners and outside on different models and start it was fiscally prudent to take the impairment now. I covered it. Thanks Chris. We're still investing, but yes, but that's why.

Q: Good morning, everyone. So can you talk, Bill, about what you saw in terms of the cadence of demand for your products last quarter, I think you suggested that January came in a little light, but then you're already seeing sort of improvement in February. Did that sort of continue into March and April? I don't know if you addressed that earlier.

A: No. Yes, great question, Andy. And the supposition is correct or I'll say that going every month was stronger than the previous month. So again, talking to some customers. I hate using I think once we use the word weather in my seven years here, but I know we're talking to some key customers their results, they had mentioned that weather in January and February and stuff and picking it up. So it does feel like, Andy, again, our guide is our guide. But every month, what I can say is every month was stronger than the previous month for our fiscal Q2, and again, invoice the customers back to their cautiously optimistic with a huge variability out there not knowing what the Fed is going to do and everything else that the rest of the year should be decent on volume for the overall markets and therefore, also good for Atkore.